February 16, 2013

HOW TO THINK ABOUT THE MINIMUM WAGE:

It’s obvious who benefits from a higher minimum wage: people who get minimum wage jobs. In theory, it may also boost the incomes of people who are making near the minimum wage, as employers raise those wages to ensure that these are “better than minimum wage jobs”—though in this labor market, I wouldn’t bet on it.

But who are the people in minimum wage jobs? This is primarily being sold as a poverty-fighting tool, so it would help to know how many of the people making it are poor.

The answer seems to be no; most of the people making the minimum wage are not living in households below the poverty line. Over half the people earning minimum wage are below the age of 25; for them, this is not likely to be a permanent condition, but a first rung on the income ladder. Many are students or entry level workers who are part of established households with higher earners.

Older minimum wage workers are probably more likely to be poor, but on average, they’re not. To be sure, they’re unlikely to be wealthy–this workforce will be predominantly drawn from near-poor and lower-middle-class households. Undoubtedly, they have uses for the extra money. But it will not specifically lift people out of poverty, because most of the people earning minimum wage aren’t in poverty now.

That’s who it helps. Who does it hurt?

Ironically, minimum wage workers.

Indeed.